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Buy AI-Led EME, PWR and CAT for Long-Term to Gain From Recent Softness
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Key Takeaways
EMCOR Group's record $17.14 billion RPOs reflect rising demand for AI data center infrastructure.
Quanta Services' backlog reached $53.4 billion, driven by AI data centers and infrastructure programs.
Caterpillar expects power generation growth as generative AI supports data center build-outs.
The artificial intelligence (AI)-powered data center industry is booming backed by an extremely bullish demand scenario. AI-led data centers are generating huge demand for various industries in the broader information technology sector, heavy construction, industrial and manufacturing, and electric power generation sector, to name a few.
Here, we have narrowed our search to three stocks from the heavy construction, engineering and machinery industries that have been immensely benefiting from the AI data center boom. These are: EMCOR Group Inc. (EME - Free Report) , Quanta Services Inc. (PWR - Free Report) and Caterpillar Inc. (CAT - Free Report) . Each of our picks currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Stock Selection Criteria
These stocks have rallied more than 19% year to date. However, in the past month, these stocks have provided negative returns. Moreover, each of these picks is trading at a significant discount to their 52-week high price attained this year.
Finally, these stocks have solid short-term price upside potential and their robust business model, industry-leading product portfolio, strong order backlog and guidance will ensure the northward journey of these stock prices in 2027 and beyond.
The chart below shows the price performance of our three picks year to date.
Image Source: Zacks Investment Research
The chart below shows the price performance of our three picks in the past month.
Image Source: Zacks Investment Research
EMCOR Group Inc.
EMCOR Group is a leading provider of critical infrastructure to AI-powered data centers. EME stands to benefit from rising demand for mission-critical electrical, mechanical and building systems as AI data centers require massive power and cooling investments.
EME is gaining solid traction in the fast-growing AI-data center construction market, which has become an important contributor to its expanding remaining performance obligations (RPOs). EME is actively building on its expertise to manage complex AI-powered data center projects that involve diverse customer needs.
Strong Estimate Revisions
EMCOR Group has an expected revenue and earnings growth rate of 19.6% and 27.5%, respectively, for the current year. The Zacks Consensus Estimate for the current year’s earnings has improved 12.3% over the last 60 days.
EME has an expected revenue and earnings growth rate of 11% and 12.9%, respectively, for the next year. The Zacks Consensus Estimate for the next year’s earnings has improved 13% over the last 60 days.
Image Source: Zacks Investment Research
Solid Short-Term Price Upside
The short-term average price target of brokerage firms represents an increase of 41.7% from the last closing price of $729.26. The brokerage target price is currently in the range of $885-$1,200. This indicates a maximum upside of 64.6% and no downside.
EMECOR Group has rallied 19.2% year to date. However, the stock is currently trading at a discount of 23.4% from its 52-week high of $951.96 posted on May 6, 2026.
Robust Long-Term Potential
As of June 30, 2026, RPOs, or contracted work yet to be recognized as revenue, reached a record $17.14 billion, up 43.9% year over year from $11.91 billion and 29.3% from $13.25 billion at year-end 2025.
EME’s acquired businesses also provide opportunities to enter AI-powered data center projects through existing customer relationships and technical expertise, while continued investment in AI infrastructure, digital transformation, healthcare, manufacturing, logistics and water-related projects should support the company’s project pipeline and create multiple avenues for long-term growth.
Image Source: Zacks Investment Research
Quanta Services Inc.
Quanta Services is well-positioned to capitalize on robust infrastructure spending across utility, power generation, technology and load center markets. The ongoing expansion of AI data centers, grid modernization, renewable generation and advanced manufacturing is driving customers to undertake larger, multiyear infrastructure programs.
Surging AI-related power demand and expanding utility investments are driving data center project opportunities, making data centers a central pillar of PWR’s long-term growth strategy. The company is heavily investing in deepening its vertical supply chain to offset the ongoing global uncertainties and rising inflation.
Strong Estimate Revisions
Quanta Services has an expected revenue and earnings growth rate of 38.4% and 53%, respectively, for the current year. The Zacks Consensus Estimate for the current year’s earnings has improved 1.3% over the last seven days.
PWR has an expected revenue and earnings growth rate of 14.7% and 15.8%, respectively, for the next year. The Zacks Consensus Estimate for the next year’s earnings has improved 1.3% over the last seven days.
Image Source: Zacks Investment Research
Solid Short-Term Price Upside
The short-term average price target of brokerage firms represents an increase of 30.8% from the last closing price of $616.54. The brokerage target price is currently in the range of $690-$976. This indicates a maximum upside of 58.3% and no downside.
Quanta Services has jumped 46.1% year to date. However, the stock is currently trading at a discount of 21.8% from its 52-week high of $788.75 posted on May 6, 2026.
Robust Long-Term Potential
Favorable trends in AI data centers helped drive total backlog to a record $53.4 billion as of June 30, 2026, up 49% year over year from $35.8 billion in June 2025. The increase was broad-based, with Electric Infrastructure Solutions backlog rising year over year to $43.8 billion from $30.3 billion, while Underground and Infrastructure Solutions backlog climbed to $9.7 billion from $5.6 billion.
PWR’s acquisition strategy is creating another growth avenue while complementing organic opportunities. Acquisitions of Phalcon, Enerfab, Percheron and PSD expand its electrical, mechanical, fabrication, engineering and front-end capabilities while broadening exposure to AI-powered data centers, power generation, advanced manufacturing, utilities and other critical infrastructure.
Image Source: Zacks Investment Research
Caterpillar Inc.
Caterpillar is gaining from rising AI data-center-related power demand. As big technology companies establish data centers globally to support their generative AI applications, CAT is witnessing robust order levels for reciprocating engines for data centers.
CAT expects full-year 2026 power generation growth in both reciprocating engines and Solar Turbines as cloud computing and generative AI support data-center build-outs. The company continues to add capacity against this multi-year opportunity.
Strong Estimate Revisions
Caterpillar has an expected revenue and earnings growth rate of 17.4% and 43.6%, respectively, for the current year. The Zacks Consensus Estimate for the current year’s earnings has improved 1.5% over the last 30 days.
CAT has an expected revenue and earnings growth rate of 10.9% and 20.5%, respectively, for the next year. The Zacks Consensus Estimate for next year’s earnings has improved 1.1% over the last 30 days.
Image Source: Zacks Investment Research
Solid Short-Term Price Upside
The short-term average price target of brokerage firms represents an increase of 26.4% from the last closing price of $798.57. The brokerage target price is currently in the range of $882-$1,225. This indicates a maximum upside of 53.4% and no downside.
Caterpillar has surged 39.4% year to date. However, the stock is currently trading at a discount of 25.6% from its 52-week high of $1,073.46 posted on June 30, 2026.
Robust Long-Term Potential
CAT’s long-term plan calls for large reciprocating engine capacity nearly three times the 2024 levels and Power Generation sales more than three times the 2024 levels by 2030. It is also restarting a 10-megawatt gas reciprocating engine platform, adding about 1.5 gigawatts of capacity with shipments expected from fourth-quarter 2026.
Caterpillar continues to invest in digital capabilities, connected assets, services and more productive equipment to deepen customer relationships beyond new-machine sales. The company targets services revenues of $30 billion by 2030, up from $24 billion in 2025. CAT is also extending its digital and AI capabilities through Cat AI Assistant, its expanded collaboration with NVIDIA Corp. (NVDA - Free Report) , RPMGlobal and Skycatch.
View the Zacks #1 Rank List
Image: Bigstock
Buy AI-Led EME, PWR and CAT for Long-Term to Gain From Recent Softness
Key Takeaways
The artificial intelligence (AI)-powered data center industry is booming backed by an extremely bullish demand scenario. AI-led data centers are generating huge demand for various industries in the broader information technology sector, heavy construction, industrial and manufacturing, and electric power generation sector, to name a few.
Here, we have narrowed our search to three stocks from the heavy construction, engineering and machinery industries that have been immensely benefiting from the AI data center boom. These are: EMCOR Group Inc. (EME - Free Report) , Quanta Services Inc. (PWR - Free Report) and Caterpillar Inc. (CAT - Free Report) . Each of our picks currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Stock Selection Criteria
These stocks have rallied more than 19% year to date. However, in the past month, these stocks have provided negative returns. Moreover, each of these picks is trading at a significant discount to their 52-week high price attained this year.
Finally, these stocks have solid short-term price upside potential and their robust business model, industry-leading product portfolio, strong order backlog and guidance will ensure the northward journey of these stock prices in 2027 and beyond.
The chart below shows the price performance of our three picks year to date.
Image Source: Zacks Investment Research
The chart below shows the price performance of our three picks in the past month.
Image Source: Zacks Investment Research
EMCOR Group Inc.
EMCOR Group is a leading provider of critical infrastructure to AI-powered data centers. EME stands to benefit from rising demand for mission-critical electrical, mechanical and building systems as AI data centers require massive power and cooling investments.
EME is gaining solid traction in the fast-growing AI-data center construction market, which has become an important contributor to its expanding remaining performance obligations (RPOs). EME is actively building on its expertise to manage complex AI-powered data center projects that involve diverse customer needs.
Strong Estimate Revisions
EMCOR Group has an expected revenue and earnings growth rate of 19.6% and 27.5%, respectively, for the current year. The Zacks Consensus Estimate for the current year’s earnings has improved 12.3% over the last 60 days.
EME has an expected revenue and earnings growth rate of 11% and 12.9%, respectively, for the next year. The Zacks Consensus Estimate for the next year’s earnings has improved 13% over the last 60 days.
Image Source: Zacks Investment Research
Solid Short-Term Price Upside
The short-term average price target of brokerage firms represents an increase of 41.7% from the last closing price of $729.26. The brokerage target price is currently in the range of $885-$1,200. This indicates a maximum upside of 64.6% and no downside.
EMECOR Group has rallied 19.2% year to date. However, the stock is currently trading at a discount of 23.4% from its 52-week high of $951.96 posted on May 6, 2026.
Robust Long-Term Potential
As of June 30, 2026, RPOs, or contracted work yet to be recognized as revenue, reached a record $17.14 billion, up 43.9% year over year from $11.91 billion and 29.3% from $13.25 billion at year-end 2025.
EME’s acquired businesses also provide opportunities to enter AI-powered data center projects through existing customer relationships and technical expertise, while continued investment in AI infrastructure, digital transformation, healthcare, manufacturing, logistics and water-related projects should support the company’s project pipeline and create multiple avenues for long-term growth.
Image Source: Zacks Investment Research
Quanta Services Inc.
Quanta Services is well-positioned to capitalize on robust infrastructure spending across utility, power generation, technology and load center markets. The ongoing expansion of AI data centers, grid modernization, renewable generation and advanced manufacturing is driving customers to undertake larger, multiyear infrastructure programs.
Surging AI-related power demand and expanding utility investments are driving data center project opportunities, making data centers a central pillar of PWR’s long-term growth strategy. The company is heavily investing in deepening its vertical supply chain to offset the ongoing global uncertainties and rising inflation.
Strong Estimate Revisions
Quanta Services has an expected revenue and earnings growth rate of 38.4% and 53%, respectively, for the current year. The Zacks Consensus Estimate for the current year’s earnings has improved 1.3% over the last seven days.
PWR has an expected revenue and earnings growth rate of 14.7% and 15.8%, respectively, for the next year. The Zacks Consensus Estimate for the next year’s earnings has improved 1.3% over the last seven days.
Image Source: Zacks Investment Research
Solid Short-Term Price Upside
The short-term average price target of brokerage firms represents an increase of 30.8% from the last closing price of $616.54. The brokerage target price is currently in the range of $690-$976. This indicates a maximum upside of 58.3% and no downside.
Quanta Services has jumped 46.1% year to date. However, the stock is currently trading at a discount of 21.8% from its 52-week high of $788.75 posted on May 6, 2026.
Robust Long-Term Potential
Favorable trends in AI data centers helped drive total backlog to a record $53.4 billion as of June 30, 2026, up 49% year over year from $35.8 billion in June 2025. The increase was broad-based, with Electric Infrastructure Solutions backlog rising year over year to $43.8 billion from $30.3 billion, while Underground and Infrastructure Solutions backlog climbed to $9.7 billion from $5.6 billion.
PWR’s acquisition strategy is creating another growth avenue while complementing organic opportunities. Acquisitions of Phalcon, Enerfab, Percheron and PSD expand its electrical, mechanical, fabrication, engineering and front-end capabilities while broadening exposure to AI-powered data centers, power generation, advanced manufacturing, utilities and other critical infrastructure.
Image Source: Zacks Investment Research
Caterpillar Inc.
Caterpillar is gaining from rising AI data-center-related power demand. As big technology companies establish data centers globally to support their generative AI applications, CAT is witnessing robust order levels for reciprocating engines for data centers.
CAT expects full-year 2026 power generation growth in both reciprocating engines and Solar Turbines as cloud computing and generative AI support data-center build-outs. The company continues to add capacity against this multi-year opportunity.
Strong Estimate Revisions
Caterpillar has an expected revenue and earnings growth rate of 17.4% and 43.6%, respectively, for the current year. The Zacks Consensus Estimate for the current year’s earnings has improved 1.5% over the last 30 days.
CAT has an expected revenue and earnings growth rate of 10.9% and 20.5%, respectively, for the next year. The Zacks Consensus Estimate for next year’s earnings has improved 1.1% over the last 30 days.
Image Source: Zacks Investment Research
Solid Short-Term Price Upside
The short-term average price target of brokerage firms represents an increase of 26.4% from the last closing price of $798.57. The brokerage target price is currently in the range of $882-$1,225. This indicates a maximum upside of 53.4% and no downside.
Caterpillar has surged 39.4% year to date. However, the stock is currently trading at a discount of 25.6% from its 52-week high of $1,073.46 posted on June 30, 2026.
Robust Long-Term Potential
CAT’s long-term plan calls for large reciprocating engine capacity nearly three times the 2024 levels and Power Generation sales more than three times the 2024 levels by 2030. It is also restarting a 10-megawatt gas reciprocating engine platform, adding about 1.5 gigawatts of capacity with shipments expected from fourth-quarter 2026.
Caterpillar continues to invest in digital capabilities, connected assets, services and more productive equipment to deepen customer relationships beyond new-machine sales. The company targets services revenues of $30 billion by 2030, up from $24 billion in 2025. CAT is also extending its digital and AI capabilities through Cat AI Assistant, its expanded collaboration with NVIDIA Corp. (NVDA - Free Report) , RPMGlobal and Skycatch.
Image Source: Zacks Investment Research